The five main business banks say they are confident of meeting the full year
small business lending targets agreed with Government after falling £600m
shy at the half year mark

High Street banks are “on track” to lend the £76bn pledged as part of the Merlin agreement with the Government, their industry body has said.

The five banks – Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland and Santander – made £100.4bn in gross new lending to UK businesses during the first half of the year, including £37.4bn to small and medium sized enterprises (SMEs), the British Bankers’ Association said.

Under the Merlin agreement, the banks said they would make £190bn of gross new lending available, including £76bn for SMEs, in 2011.

Business groups welcomed the progress but warned that more competition was required between the banks and that credit had to be made available at the right price.

John Walker, national chairman of the Federation of Small Businesses, pointed to a recent survey of members that showed a third of those that had applied for credit lines in the last 12 months had been refused. “This has meant that growth opportunities have been missed or delayed for many businesses,” he said.

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Speaking for manufacturers, Lee Hopley chief economist at the EEF, said: “The Banks have been true to their word and made credit available as they said they would. But however positive the numbers are, the Merlin targets only tell us part of the story. There is still the question of lending on what terms and at what price?

“Official Bank of England data earlier in the month showed that smallest SMEs are seeing rates on their loans drifting up. And the banks’ own Business Finance Monitor highlighted the extent of discouraged demand amongst SMEs with 15pc of SMEs not even approaching their banks, despite wanting finance.”

A spokesman for the Merlin banks said: “The first half year performance demonstrates the banks’ commitment to providing businesses with the financial support they need to invest and grow and the significant progress made this year.

“The banks’ efforts to encourage customers to come forward with borrowing proposals are set against the overall economic environment which remains challenging and business demand for credit which remains weak.”